How to buy your first car: insurance

Passing your driving test is a great achievement. Here’s how to build on that success by buying a safe, reliable car without breaking the bank...

How to buy your first car – insurance

It’s not just the cost of financing a car that young drivers and their parents have to worry about; insurance can be crushingly expensive. Car insurance premiums are currently at their highest level for two years, and found that premiums increased by £32 (6%) year-on-year in the second quarter of 2022, to reach an average of £554.

However, drivers can save money by shopping around for the best value cover, and by buying cover up to four weeks before it's needed. What Car? research revealed that a 20-year-old male driver could save £750 on cover for a 2021 Skoda Fabia 1.0 SE by deferring the start date of the policy for four weeks. 

Any premium will be based on all sorts of variables, including the driver’s age, driving experience, postcode and so on. Clearly, there’s not a lot a teenager can do about their age and number of years on the road, but they can do something about the car they drive.

Cars are given an insurance grouping of 1-50. Thatcham Research decides which car fits into which group, taking into account a car’s performance, price, safety, security and the cost of repairing. The lower the insurance group number, the lower the insurance premium should be.

Government to investigate graduated driving licences for new drivers

Other ways to reduce premiums include limited-mileage policies. However, it’s important to be realistic when setting a mileage limit, because there are likely to be extra fees if it’s exceeded and your cover could be invalid if you exceed it but don't tell the insurer.

Setting a high excess (the amount the driver has to contribute to repairs in the event of a claim) is another option, but be sure the amount isn’t more than you’ll be able to afford if you have to pay out.

Another means of chipping away at the annual premium is to insure a second, responsible driver (say, a parent or an older sibling). Just be sure that it’s someone who will actually drive the car. And don’t be tempted to make a parent the main driver on a policy if the car is really the child's; this is known as ‘fronting’ and is considered insurance fraud.

Telematics or 'black box' insurance can also reduce a young driver’s premium. With these policies, the car is fitted with a black box to monitor when and how it is driven. Stick to the speed limit and drive smoothly and the cost of cover will come down after a while. But drive badly and your premium could rise. There are negatives, though, because some policies include night or mileage limits, and if you drive aggressively you could see your premiums rise beyond your initial quote.

How about all-in-one car and finance deals?

How to buy your first car – insurance

One way to get on top of buying a new car and insuring it in one go is to opt for a PCP scheme that also includes the cost of insurance in a single monthly payment.

Peugeot offers one called Just Add Fuel. It’s available to drivers aged from 18 to 20 with less than two years' no claims discount. The only stipulation is that they have a telematics box fitted to monitor how the car is driven and report back to the insurer. As the name implies, the scheme not only covers the cost of insurance but also routine bills such as servicing. 

Peugeot 208 front - blue 69-plate car

Monthly payments vary but, based on a low-risk address and a £4290 deposit, Peugeot’s online finance calculator quoted us a monthly payment of £208 for an 18-year-old buying a Peugeot 208 1.2 Active Premium on a 37-month deal, with an annual mileage limit of 6000 miles.

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